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Spain's Property Bubble

Updated April 26, 2007 12:01 a.m. ET

We warned last year that Spain's buoyant housing market could bring serious economic trouble and take no satisfaction from seeing this prognosis start to come true.

Shares of the country's biggest real estate companies plunged Tuesday -- some more than 10% -- before recovering slightly yesterday. The sell-off was driven by fears that the property bubble was about to burst. The central bank calculates that after years of double-digit increases, housing prices are about 30% overvalued. The bank also says that by the end of last...